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. Last Updated: 07/27/2016

60% income tax could be slashed

The Russian government is considering cutting by half its controversial 60 percent income tax on foreign resident's worldwide income.


While the decision is not official, an American diplomat said the decision is now "in the process of being worked out" by the Russian Cabinet under the direction of First Deputy Prime Minister Yegor Gaidar.


"The tax is causing such a commotion in the foreign business community", said Peter Fischer, president of the American Business Club. "Anybody with any voice said that the 60 percent tax would be ruinous. You would think somebody got the message".


But because the income-tax change is not yet official, Moscow-based law and accounting firms are advising clients to file preliminary 1992 tax returns by July 1 at the 60 percent rate.


"We're hoping the tax rate will go down, but we don't have a guarantee, so we don't want to put our clients at


risk", said Jessica Perera, expatriate tax manager for Ernst & Young.


Added Robert Langer, a tax lawyer with Chadbourne, Hedman, Raabe & The Union of Advocates: "Everybody is feeling that they've made peace with this based on the 60 percent tax. You'd have to be a gambler to do otherwise".


Under current Russian law, foreigners are classified as residents once they have lived in Russia for 183 days, beginning January 1, 1992.


If the law is to be changed, it will likely be done in the next two weeks - before the Russian parliament adjourns for the summer, Perera said.


If not, it may still be legally possible for Yeltsin to change the law without a parliamentary vote, Langer said.


Some foreign residents, such as American diplomats, are already exempt from the tax through various treaties and reciprocity agreements


American journalists are also exempt for a two-year period, Perera said.